Section 506.2 - Separate accounts(a) Any life insurance company organized under the laws of this Commonwealth may establish one or more separate accounts and may allocate thereto any amounts (including without limitation proceeds applied under optional modes of settlement or under dividend options) to provide for life insurance or annuities (and benefits incidental thereto) payable in fixed or variable amounts or both, and for any other investment purpose consistent with a company's investment powers under sections 404.2, 406 and 406.1 or this subsection in connection with any product permissible to such company under this act and subject to the following: (1) The income, gains and losses, realized or unrealized, from assets allocated to a separate account shall, in accordance with applicable contracts, be credited to or charged against such account, without regard to other income, gains or losses of the company. Life insurance companies may maintain one or more separate accounts subject to reasonable regulations promulgated by the commissioner with respect to: (i) Separate accounts with all or any portion of the benefits guaranteed as to dollar amounts and duration.(ii) Separate accounts with all or any portion of the funds guaranteed as to the principal amount or stated rate of interest.(2) Except as herein provided, the amounts allocated to each separate account established by the insurer pursuant to this section, together with any accumulations thereon, may be invested and reinvested in any class of investments which may be authorized in the written contract or agreement without regard to any investment limitations otherwise applicable to the investment of life insurance companies. The investments in such separate account or accounts shall not be taken into account in the investment limitations applicable to the investments of the insurance company under the provisions of this act.(3) Assets allocated to a separate account shall be valued at their market value on the date of valuation, or at amortized cost if it approximates market value. If there is no readily available market value, then such assets shall be valued as provided under the terms of the contract or the rules or other written agreement applicable to such separate account or by regulation prescribed by the commissioner.(4) Deleted by amendment. 1986, June 11, P.L. 226, No. 64, § 9, imd. effective.(5) Amounts allocated to a separate account shall be owned by the company, and the company shall not be, nor hold itself out to be, a trustee with respect to such amounts. If and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the company may conduct. Sales, exchanges or other transfers of assets may be made by a company at any time between any of its separate accounts or between any other investment account and one or more of its separate accounts provided that the transfer into or from a separate account is made by:(ii) A transfer of assets having a valuation which could be readily determined in the marketplace.(iii) Such other transfers as the commissioner in his discretion may approve.(6) If pursuant to the terms of the applicable contracts amounts allocated to a separate account are to be invested in shares of a specified investment company registered under the Investment Company Act of 1940, as amended, which shares are to be held for the exclusive benefit of the applicable contracts, such shares shall, if and to the extent provided in the applicable contracts, be deemed to be a separate account pursuant to the provisions of section 406.2. (7) Deleted by amendment. 1986, June 11, P.L. 226, No. 64, § 9, imd. effective.(8) To the extent the company deems it necessary to comply with any applicable Federal or State laws, such company, with respect to any separate account, including without limitation any separate account which is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of such account, including without limitation special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with such company, to manage the business of such account.(b) Any contract providing benefits for life insurance or annuities payable in variable amounts delivered or issued for delivery in this Commonwealth shall contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of such variable benefits. Any such contract under which the benefits vary to reflect investment experience, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that such dollar amount will so vary and shall contain on its first page a statement to the effect that the benefits thereunder are on a variable basis.(c) No company shall deliver or issue for delivery within this Commonwealth variable contracts unless it is licensed or organized to do a life insurance business in this Commonwealth, and the Insurance Commissioner is satisfied that its condition or method of operation, including investment policy, in connection with the issuance of such contracts will not render its operation hazardous to the public or its policyholders in this Commonwealth. In this connection, the Insurance Commissioner shall consider among other things: (1) The history and financial condition of the company;(2) The character, responsibility and general fitness of the officers and directors or trustees of the company, and whether such individuals command the public confidence and warrant the belief that the business of the company will be honestly and efficiently conducted in accordance with the intent and purpose of this act; and(3) The law and regulation under which the company is authorized in the state of domicile to issue variable contracts. The state of entry of an alien company shall be deemed its place of domicile for this purpose. If the company is a subsidiary of an admitted life insurance company, or affiliated with such company through common management or ownership, it may be deemed by the Insurance Commissioner to have met the provisions of this section if either it or the parent or the affiliated company meets the requirements hereof.
(d) Notwithstanding any other provision of law, the Insurance Commissioner shall have sole authority to regulate the issuance and sale of variable contracts, including the approval or disapproval of provisions of the contracts under section 354 of this act, and, further including annual statements furnished to contract holders, and to issue such reasonable rules and regulations as may be appropriate to carry out the purposes and provisions of section 406.2 in the public interest, including that the premiums to be charged shall not be excessive, inadequate or unfairly discriminatory, and the prevention of excessive management, administrative and sales charges. Variable contracts, and agents or other persons who sell variable contracts, shall not be subject to the act of December 5, 1972 (P.L. 1280, No. 284), known as the "Pennsylvania Securities Act of 1972," or to regulation by the Pennsylvania Securities Commission.(e) Deleted by amendment. 1986, June 11, P.L. 226, No. 64, § 9, imd. effective.(f) Except for sections 410(b) , 410(c), 410(h), 410(i), 410(j), 410(k) and 410A of The Insurance Company Law of 1921 andsection 6(1) of the act of May 11, 1949 (P.L. 1210, No. 367), entitled "An act relating to group life insurance; describing permitted policies and restrictions thereon, the premium basis thereof and rights thereunder; limiting the amount of such insurance; prescribing standard policy provisions; and requiring notice of conversion privileges," in the case of variable life insurance contract andsections 410B(a) , 410B(f), 410B(g), and 410B(3) of The Insurance Company Law of 1921 in the case of a variable annuity contract and except as otherwise provided in section 406.2, all pertinent provisions of the insurance laws shall apply to separate accounts and contracts relating thereto. Any individual variable life insurance or variable annuity contract, delivered or issued for delivery in this Commonwealth shall contain grace, reinstatement, incontestability, nonforfeiture and right to review provisions as shall be provided in rules and regulations established by the commissioner appropriate to such contract; and any group variable life insurance contract, delivered or issued for delivery in this Commonwealth shall contain a grace provision as shall be provided in rules and regulations established by the commissioner appropriate for such contract. The reserve liability for variable contracts shall be established in accordance with actuarial procedures acceptable to the Insurance Commissioner that recognize the variable nature of the benefits provided and any mortality guarantees.
1921, May 17, P.L. 682, art. IV, § 406.2, added 1963, Aug. 24, P.L. 1194, § 1. Amended 1965, Dec. 22, P.L. 1151, § 1; 1968, Jan. 19, P.L. (1967) 1020, No. 447, §§ 3, 4; 1970, July 23, P.L. 586, No. 196, § 1; 1974, Dec. 13, P.L. 951, No. 313, § 3, imd. effective; 1986, June 11, P.L. 226, No. 64, § 9, imd. effective; 1996, Dec. 18, P.L. 1003, No. 154, § 1, effective in 60 days.